Daily Times

The official statement at the end of the plenary session in Florida, USA, says that Pakistan would continue to fend off FATF fangs. The Financial Action Task Force has asked Pakistan to implement a 27-points action plan by October. The country has failed to make two previous deadlines in January and May to avoid figuring on the terrorism black list. Pakistan was put on the Grey List in 2018 by the global money laundering and terrorist finance watchdog, for the second time after 2012-2015.

Established since 1989, the Task Force is an inter-governmental organization to develop policies and standards to combat money laundering and terrorist financing. Money laundering stands for the process of making dirty or ill-gotten money look clean. Terrorist finance implies collecting funds to sponsor acts of terror or terrorist organizations. The FATF considers both financial crimes that pose threat to international financial system.

The FATF is a 36-members body that requires the support of at least three member states to avoid blacklisting. Pakistan garnered the support of China, Turkey and Malaysia to ward off the menace. But the mandatory targets of the action plan have to be achieved by October to the satisfaction of FATF and its regional body, the Asia Pacific Group.

Pakistan is already having to deal with the adverse impact of being on the Grey List. The listing is causing an approximate loss of $10 billion per annum. Despite inking a number of MOUs, Pakistan is finding it difficult to attract actual foreign investment to address its economic crisis. The Grey List serves as negative signal to global financial and banking system for risks in transactions with Pakistan, since the international correspondents and financial intermediaries demand higher levels of diligence. Enhanced documentary requirements hamper trade finance. Access to global capital market is limited.

Pakistan is already having to deal with the adverse impact of being on the Grey List. The listing is causing an approximate loss of $10 billion per annum. Despite inking a number of MOUs, Pakistan is finding it difficult to attract actual foreign investment to address its economic crisis

In June-2018, after being placed on the Grey List, Pakistan made high level commitments with FATF and APG to remove the deficiencies in its AML/CFT regime. The steps taken by Pakistan so far include no foreign currency transaction without national tax number, ban on currency exchange over $500 without obtaining copy of national identity card, proscription of several militant entities and seizure of their assets and revision of its TF risk assessment process. However, the FATF has expressed its dissatisfaction with the progress made so far and has advised Pakistan to implement the action plan by improving the following strategic deficiencies:

Adequate identification, assessment and supervision of terrorism financing risk should be demonstrated.

Ensuring that remedial measures and sanctions are imposed on all cases of money laundering and terrorist financing.

Coordinating efforts of the competent authorities are ensured to unearth and take enforcement action against illegal money or value transfer services.

Authorities are required without fail to identify the risk of cash couriers being used for terrorist financng and enforce controls on illicit movement of currency.

Combating financing of terrorism risk by improving inter-agency coordination including that between provincial and federal authorities.

Law enforcing agencies have to be capacitated to identify and investigate financing of terrorism and prosecute the related designated persons and entities.

Applicable sanctions are effectively imposed following the terrorism financing prosecutions and enhancement in the capacity and support for prosecutors and judiciary is achieved.

Targeted financial sanctions must be effectively imposed against all designated terrorists.

Enforcement of administrative and criminal penalties must be demonstrated against financing of terrorism finance violations through coordination between provincial and federal authorities.

It must be demonstrated that the facilities and services owned and controlled by the designated persons are deprived of their resources and the uses of resources.

FATF has urged Pakistan to comply with the measures before October in order to move out from the Grey List. Otherwise the threat of being pushed down to ‘black list’ along with North Korea and Iran, looms large.

There may be a consideration that Pakistan’s placement on the FATF’s Grey List is far more political than financial, in view of Pakistan’s conflict of interests with US in Afghanistan and ever-growing relations with China. Foreign Office of Pakistan has condemned malicious Indian campaign of ‘politicizing’ the FATF’s proceedings. But, it is inherent to international relations.

In a nutshell, Pakistan can cope with the challenge by matching its performance of 2015 when exit from Grey List was secured by complying with the action plan. Fortunately, the FATF action plan is in consonance with the structural reform agenda of the PTI government. The AML/CFT measures prescribed by FATF would certainly contribute to the documented economy and greater transparency of the financial system. Besides implementing the action plan to strengthen its anti-money laundering and counter terrorism finance regime, Pakistan must muster support of 15 out of 36 FATF members to move off Grey List in October. As a responsible nation, Pakistan has rightly assured the FATF of its “commitment to take all necessary measures to ensure completion of the action plan in a timely manner.”

The writer is country manager at JSC Subsidiary Bank in Kazakhstan